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IRS sends warning letters to more than 10k cryptocurrency holders

wsj.com

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Re: IRS sends warning letters to more than 10k cryptocurrency holders

#71

Post by [deleted] »

PKop wrote: post #69
zcrackerz wrote: post #61

Earlier quoted context omitted.

It's not buying a cup of coffee that's the issue. The issue is in converting between currencies, which is no different than investing in foreign currencies. If you exchange USD for EUR, wait a while, then exchange back to USD and you've made a profit, it's taxable.

Every taxable event is something you have to keep track of. And spending appreciated crypto, even on coffee, or anything else, is a taxable event. So the point stands that using crypto as "spending money" vs purposefully saving it as store of value is going to be a real pain, for all of the technical reasons but also the tax complexity. To see why this is the case, imagine someone saved BTC as store of value, then ye…

[deleted]

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#72

Post by mrbonner »

dsfyu404ed wrote: post #18
dev_dull wrote: post #2

The math behind crypto doesn’t magically make you immune to government oversight. All they have to do is ask, and you better not lie.

Obviously no, the math doesn't prevent them from shooting your dog and carting you away to a jail cell but your assumptions about enforcement are naive. The typical MO for tax evasion is to just not report your side gig (crypto or otherwise), hope you don't get caught and play dumb and pay up if you do get caught. This doesn't change whether it's crypto or doing under the table work which is the point I'm trying to m…

I am not sure if you're obligated to pay US federal income tax or not (either non-US resident/citizen living in the USA or US's resident/citizen in expat). If the IRS sends a formal letter to you, their intention is pretty clear that they found something wrong with your tax situation. I have had a couple of official letters from them for the last 4 - 5 years. Some of which I owed them money and I had to either pay (with penalty) or if allowed, file a amendment soon after. For others, they said I had errors in my filing and they gladly return a few dollars for me.

The first time I had to deal with them, I was surprised that the IRS is very professional, patient and courteous to me! I believe if they assume you're not trying to cheat taxes, they will help you to solve your case.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#73

Post by impostir »

arcticbull wrote: post #58
hcurtiss wrote: post #13

I'm sure there's a lot to know about this topic, but it's odd to me that they'd treat a "currency" as an appreciating asset. If I'm given a dollar (or peso) as change, and if between the time I receive the dollar and the time I spend it the currency purchasing power increases, I do not pay taxes on that gain. I can just buy more stuff with that dollar (including other currencies). In this instance, where it's increas…

1 USD always equals 1 USD and you pay taxes on gains relative to the USD as a US person. It's not possible for your USD to be an appreciating asset relative to the USD and that's how capital gains are defined. However, if you go to a store in America (and hypothetically) they give you change in Euros, then you take that to another store, and redeem the Euros there, you do in fact owe taxes on the increase in value of…

At one point in time and at one location. At different places in the US, 1 USD can purchase more or less. So on the internet, the purchasing power of the dollar is fairly nebulous. So, I agree, but with more nitpickiness.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#74

Post by gcbw2 »

dev_dull wrote: post #2

The math behind crypto doesn’t magically make you immune to government oversight. All they have to do is ask, and you better not lie.

> All they have to do is ask, and you better not lie.

because asking everyone how much they have in offshore tax havens is working so well.

heck, not even when the information is given to the IRS anything happens: https://en.wikipedia.org/wiki/Panama_Papers#United_States

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#75

Post by pjc50 »

umvi wrote: post #45
fortran77 wrote: post #4

This is no different from any other profit or gain. The Government isn't specifically targeting these people; it just wants them to make sure they realize it's like any other investment.

I hate that people treat currencies as an "investment". In my mind, crypto concurrency is the perfect value-store (like gold used to be), not an appreciating asset. Yet because people treat it like stocks, it behaves like stocks.

If it's a store of value, then the value of that value can go up and down relative to the rest of the economy. Just like gold does.

(Money supply is not the only factor in price level, despite what everyone seems to think in crypto space)

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#76

Post by duxup »

dev_dull wrote: post #2

The math behind crypto doesn’t magically make you immune to government oversight. All they have to do is ask, and you better not lie.

The bitcoin / crptyo currency... ethos? (not sure what word to use there) seems to continuously collide into the reality of living in a society.

That doesn't make them incompatible, but it does perhaps provide some lessons for everyone on why financial systems are the way they are as it is, and how you can't just jump on a technology and escape.

At the very least it has all been an interesting thing to learn from.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#77

Post by hcurtiss »

arcticbull wrote: post #68
hcurtiss wrote: post #63

Earlier quoted context omitted.

Fair enough, but if I convert a bunch of dollars to pesos and then the value of a peso increases and it allows me to buy a nicer car (in pesos) than I could have when I received the peso, is that taxable? If it is, is the dollar the only exception to this rule? Because I know for a fact nobody pays taxes (or carries forward losses) on the increased purchasing power of their cash held in dollars.

Yes, because you as a US person track your gains/losses relative to the USD so if you buy Pesos and the value of the Peso changes relative to the US Dollar over the time period you held them that is in fact a capital gain and reportable to the IRS for tax purposes. Every country that taxes capital gains operates the same way to the best of my knowledge. > Because I know for a fact nobody pays taxes (or carries forwar…

This is helpful. Thank you. The whole thing is a little odd to me. I'm used to thinking about paying taxes on marginal increase in value, and I had never considered that to be defined exclusively in dollars. I suppose it is. If I buy for $10 and sell for $20, I pay taxes on $10 even if the value of the dollar dropped by half in the intervening period.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#78

Post by arcticbull »

mrbonner wrote: post #72
dsfyu404ed wrote: post #18

Earlier quoted context omitted.

Obviously no, the math doesn't prevent them from shooting your dog and carting you away to a jail cell but your assumptions about enforcement are naive. The typical MO for tax evasion is to just not report your side gig (crypto or otherwise), hope you don't get caught and play dumb and pay up if you do get caught. This doesn't change whether it's crypto or doing under the table work which is the point I'm trying to m…

I am not sure if you're obligated to pay US federal income tax or not (either non-US resident/citizen living in the USA or US's resident/citizen in expat). If the IRS sends a formal letter to you, their intention is pretty clear that they found something wrong with your tax situation. I have had a couple of official letters from them for the last 4 - 5 years. Some of which I owed them money and I had to either pay (w…

They've even got flexible payment options ^_^ some of which are mandatory.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#79

Post by icebraining »

hcurtiss wrote: post #63
mikeash wrote: post #22

Earlier quoted context omitted.

Regular foreign currency also gets taxed if you make a profit trading it.

Fair enough, but if I convert a bunch of dollars to pesos and then the value of a peso increases and it allows me to buy a nicer car (in pesos) than I could have when I received the peso, is that taxable? If it is, is the dollar the only exception to this rule? Because I know for a fact nobody pays taxes (or carries forward losses) on the increased purchasing power of their cash held in dollars.

If the USD you own becomes more valuable, then the same nominal amount you're paying will also be a bigger payment in real terms.

Re: IRS sends warning letters to more than 10k cryptocurrency holders

#80

Post by PKop »

nostrademons wrote: post #12
ilovecaching wrote: post #5

So under the current laws does a person only pay taxes when converting to and from fiat to crypto, or does it apply to crypto transactions of any kind?

Applies to crypto transactions of any kind. This is a major impediment to use of crypto for its intended purpose, and there are bills currently proposed in Congress to reverse this.

> to use of crypto for its intended purpose

Its intended purpose is debatable. Certainly this is an impediment to using it as a currency, or day to day spending money vs long term store of value, like gold, which also requires paying capital gains taxes.

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